In setting the speed limit, the government should consider only externalities, e.g., the tendency of one driver's speed to endanger other drivers. In this paper, we discuss the methodology for estimating the optimal speed limit, based on externalities. We carry out a numerical illustration to demonstrate how the methodology leads to (1) a numerical estimate of the optimum speed limit, (2) an estimate of the dollar loss from a suboptimum speed limit, (3) an estimate of cost per life saved, and (4) the suggestion that federal traffic data collection efforts and traffic studies be redirected toward discovering two crucial parameters: the speed drivers would go if left alone and the ratio of the external to internal marginal cost of highway speed. (Author)
The Optimum Speed Limit
1981
27 pages
Report
No indication
English
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